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Feds Charge Former Siemens Executives With Bribery

Since German engineering firm Siemens agreed to plead guilty to U.S. bribery charges in 2008 and pay $1.6 billion to U.S. and German authorities, a dark cloud has loomed over the biggest bribery case in corporate history. How could such a massive corruption scheme be uncovered without any charges being brought against any individuals? How could the people working for Siemens who perpetrated the crimes not be held accountable by the U.S. government?

The U.S. Attorney in Manhattan, Preet Bharara, announced on Tuesday that he had charged eight former Siemens executives and agents with engaging in a decade-long scheme to bribe senior government officials of Argentina. Bharara did not lay blame at the doorstep of low-level underlings, indicting Uriel Sharef, a former member of the central executive committee of Siemens, and Herbert Steffen, a former chief executive officer of Siemens Argentina. A former chief financial officer of Siemens Argentina, Andres Truppel, has also been indicted.

The government now alleges that eight individuals caused Siemens to commit to paying nearly $100 million in bribes to Argentine government officials during the bidding process for a $1 billion Argentine contract to revamp national identity cards. After the contract was terminated by the Argentine government, Siemens filed an arbitration claim that resulted in a $220 million award, a process that was allegedly supported by the accused conspirators getting Siemens to pay more bribes to ensure the arbitration panel never found out about the bribery.

In recent years Justice Department FCPA prosecutions have exploded to unprecedented levels with companies like Daimler, BAE Systems, KBR and Panalpina paying huge fines and entering into agreements that resolve the U.S. government’s criminal investigation. Bringing criminal cases against individuals brings some logical consistency to the Justice Department’s efforts, but it also is fraught with risk. Individuals facing serious prison time are much more likely to put up a fight and test some of the legal theories that are behind the FCPA boom.

Indeed, the feds have already had trouble litigating these cases in court. Just a few days ago, a federal judge dismissed indictments against Keith Lindsay, Steve Lee and Lindsey Manufacturing after they were convicted of FCPA violations, citing prosecutorial misconduct. The feds spent five years prosecuting Frederic Bourke Jr., cofounder of Dooney & Bourke, saying he should go to jail for ten years for investing with an allegedly corrupt Czech entrepreneur, but a federal judge only gave him one year and a day, saying “it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook.” The government itself dismissed bribery charges it brought against David Pinkerton, a former AIG managing director who had been indicted alongside Bourke. Then there is James Giffen, who was charged under the FCPA for conducting a massive bribery scheme in Kazakhstan’s oil industry. Giffen fought the charges by saying the U.S. government knew and approved of his efforts in Kazakhstan, which were deemed to be in the interest of the U.S. The feds eventually dropped the charges and Giffen pleaded guilty to a tax misdemeanor. The federal judge, who had access to secret evidence, gave Giffen no jail time and called him a hero.

Being forced to litigate these FCPA cases in court may also make another fact clear. The Justice Department’s criminal investigations in most of these cases have essentially been outsourced to private lawyers and accountants, who have made fortunes off of enhanced FCPA prosecution. The feds force the companies to foot the bill. Siemens spent $1 billion on its internal investigation and handed over the evidence to the Justice Department, which used it to bring these most recent indictments.

It’s unclear if this recent case will result in any litigation or trial. The individuals who have now been charged in the Siemens case come from Germany, Switzerland, Argentina and Israel. None of them are even in the U.S. to face the charges. Still, federal prosecutors seem ready to fight FCPA cases in court.

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